AMZN + WFM = $1T
Amazon’s acquisition of Whole Foods, should it close, is the white flag (the kind signaling one lap to go, vs. surrender) in Amazon’s march to a trillion. This transaction will be to retail what Facebook’s acquisition of Instagram was to media — the deal everyone wishes they had done. Amazon will reach $1T in value in the next 36 months, at the expense of … everyone.
— Amazon / Whole Foods will be the fourth-largest grocer in the US, and will likely post growth rates no $10B+ retailer, sans Amazon, has registered. The Seattle firm will apply its operational chops and lower (zero) profit hurdle to the Whole Foods business model and bring prices (way) down. If you wish you could shop at Whole Foods more often, but it’s too expensive, your prayers have been answered. Whole Foods will become the grocery equivalent of a Mercedes for the price of a Toyota. Grocery has stuck their chin out (little innovation), and the entire sector is about to have its jaw shattered.
— Amazon Media Group will now be able to sell online and offline media. The $1.6B division, overlooked by most analysts despite being 4x the size of Snapchat, will become the fastest-growing, most profitable media business in the world and begin eating into Google and Facebook’s dominance. In addition, they won’t even pretend to work with agencies, in contrast to Facebook and Google, who pet agencies on Cannes’ beaches as they slowly euthanize them.
— Amazon will displace Apple as the top tech hardware innovator, with Alexa cementing itself as the gadget that defines the decade (post iPhone). Grocery / commerce via Alexa will create the utility that Alexa needs to maintain its lead over Google and Apple’s home / voice offerings as they try to play catch-up.
— Amazon has warehouses within 20 miles of 45% of the US population. It will soon have an additional 446 warehouses, including in 32 states where Amazon has not yet established a grocery presence. However, these are warehouses (Whole Foods stores) that also make money.
— Amazon will use Whole Foods as an additional benefit of Prime, and more households will have Prime than cable TV within three years.
— The entire grocery industry is, since last Friday, a sea of regret as boards met over the weekend to ask their CEOs, “Why the fuck didn’t we buy Whole Foods, trading at multi-year lows?” As grocery players realize they’re impotent to respond, CPG firms will begin to realize this is likely worse for them. Amazon now has the full toolkit (user reviews, voice, same-day fulfillment, trust, cheap capital) to conspire with 300M consumers to starch the margin from brands.
— P&G, Unilever, Nestle, and Conagra should recognize they’re no longer competing with each other and form a consortium to present a counterbid for Whole Foods. It likely won’t work (see above: Amazon has cheap capital), but they should make Whole Foods more expensive for Amazon.
— The advertising industrial complex and the media sector will also begin wondering if this puts pressure on their business. Yes, it does.
So … What Next?
— Whole Foods is a role model for merchandising, curation, and in-store experience. Operationally, it’s a shitshow, and even Amazon will likely struggle with the complexity of stores.
— Amazon will shore up their brick-and-mortar competence, and dominance of affluent homes, and acquire Nordstrom or Macy’s. Nordstrom is the better option as it’s local, in Seattle. However, it’s family controlled, which means decision making is dysfunctional.
— Amazon will breach $2,000/share in 24 months. Soon after, as consumers find their neighbor / dad / aunt no longer has a job courtesy of Amazon, a state District Attorney will realize the fastest path to the Governor’s Mansion is to go after Amazon and will call for a breakup.
In sum, great for Amazon shareholders and consumers … bad for everyone else. AMZN + WFM = $1T = mind blown. This. Is. Big.
Life is so rich,